Alkem Lab

Alkem Laboratories reported Q3 FY25 revenue from operations of INR33,743 million, marking a 1.5% year-on-year growth. For the nine-month period, revenue stood at INR98,208 million, growing 0.9% YoY. The company achieved a Q3 EBITDA of INR7,594 million, translating to a robust 22.5% margin, which is a 7.3% increase YoY. Net profit for the quarter was INR6,258 million, up 5.2% YoY, and for the nine months, it reached INR18,596 million, a 23.8% YoY growth.

The domestic market registered a 6% year-on-year growth in Q3 FY25, against a market growth of 7.2% as per IQVIA. The company's performance was at par or slightly better than the acute market, which grew 5.7%. Branded generic growth was even stronger at approximately 7.5%. Alkem's volume growth in India was 1.1%, surpassing the market's 0.3%. The company's strategy focuses on expanding flagship brands and enhancing its portfolio, with 7 therapies showing outperformance and 32 brands increasing market share.

The US market experienced price erosion of around 5% in Q3 FY25, though the net revenue value impact was 2.5% due to forex gains. The US business showed a -7% degrowth in Q3, an improvement from -22% in Q2, primarily due to regularization of supply rather than new launches. For Q4, the US market is expected to be flat, with 1-2 new product launches anticipated next year. Non-US markets, particularly Chile, faced significant challenges with almost 30% degrowth due to tender issues and currency depreciation, impacting overall non-US growth, which is guided to be 13-14% going forward^⏳.

Alkem announced two acquisitions: Adroit, a dermato-cosmetology focused pharmaceutical company, for INR140 crores, and Bombay Ortho, an orthopedic implant manufacturer, for INR147 crores. The Bombay Ortho acquisition aims to capitalize on the fast-growing value segment of medical devices and provides in-house manufacturing capabilities for hip and knee implants. Additionally, the company had an in-licensing deal for Exactech technology for around INR133 crores. Total MedTech investment is projected not to exceed INR2,000-2,500 crores over the next 3-4 years.

The company's focus on higher-margin offerings, market alignment, and cost-saving strategies has led to growth in EBITDA margins, reaching 22.5% in Q3 FY25. Management reiterated its full-year FY25 EBITDA margin guidance of around 19%. However, Q4 is typically the lowest quarter with higher expenses due to additional filings and R&D, which may lead to a slight contraction in the Q4 EBITDA margin. R&D spend is expected to be around 4.5% to 5% of sales.

Alkem is actively pursuing new product opportunities, notably in the GLP-1 (semaglutide) segment for India, aiming to be among the first wave of players to launch. The company has already represented itself to the regulator and is fully prepared with its R&D-developed product. In the US, approval for sacubitril-valsartan is expected to open up by July. The company plans for 5 filings in Q4 FY25, primarily generic in nature, and expects 1-2 US product launches next year.

Alkem maintains a strong financial position with zero leverage and a net cash position of approximately INR4,700 crores. The company's capital allocation strategy prioritizes India formulation business acquisitions but also considers MedTech opportunities if they offer value. The divestment of the inoperative Pithampur unit, which had not been used for 3-4 years, is expected to have no operational impact and minimal cost optimization benefits, mainly related to depreciation.